[Federal Register Volume 68, Number 57 (Tuesday, March 25, 2003)]
[Notices]
[Pages 14445-14446]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6989]



[[Page 14445]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47515; File No. SR-CBOE-2003-11]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Incorporated Relating to 
Linkage Fees

March 17, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 12, 2003 the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
items I, II, and III below, which items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to provide that its linkage fee structure 
operate as a pilot program for one year. The text of the proposed rule 
change is below; proposed language is italicized.\3\
* * * * *

  Chicago Board Options Exchange, Inc.--Fee Schedule, January 31, 2003
------------------------------------------------------------------------
                                                           Per contract
------------------------------------------------------------------------
1. Option Transaction Fees 1 2 3 4 7:
                  Equity & QQQ Options                    ..............
 
                              * * * * * * *
VI. Non-Member Market Maker (not eligible for                       $.19
 Prospective Fee Reduction Program) 8...................
                      Index Options
 
                              * * * * * * *
V. Non-Member Market Maker 8:
    [sbull] S & P 100 (including OEF), PREMIUM  OR = $1........................................
    [sbull] S & P 100 (including OEF), PREMIUM < $1.....             .15
 
                              * * * * * * *
2. Trade Match Fee 1 4 7:
 
                              * * * * * * *
    [sbull] All Other Equity, QQQ and Index Orders 8....             .05
3. Floor Brokerage Fee 1 5:
[sbull] All Other Equity, QQQ and Index Options 8.......             .04
4. Raes Access Fee (Retail Automatic Execution System) 1
 4:
 
                              * * * * * * *
[sbull] Non-Customer Transactions (Origin Code Other                .30
 Than ``C'')8...........................................
------------------------------------------------------------------------
Notes:
 * * * * * * *
\8\ Includes, on a pilot basis until January 31, 2004, orders from
  members of other exchanges executing Linkage transactions, except for
  Satisfaction Orders, which are not assessed Exchange fees per Linkage
  rules.
 * * * * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, CBOE included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
item IV below. CBOE has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ At the request of the CBOE, nonsubstantive modifications 
were made to the proposed rule text as filed with the Commission to 
indicate omitted language. Telephone call between Angelo Evangelou, 
Senior Attorney, Legal Division, CBOE, and Jennifer Lewis, Attorney, 
Division of Market Regulation, Commission, on March 17, 2003.
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A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On January 31, 2003, the Commission approved a CBOE proposal adding 
rules concerning the intermarket options linkage.\4\ As part of that 
filing, CBOE submitted an amendment making minor changes to the text of 
the proposed linkage rules and modifying CBOE's fee schedule to make 
clear that CBOE fees for linkage orders would be the same as CBOE fees 
for non-linkage orders from the same originating source (market makers 
on other exchanges). This filing merely proposes to establish that 
CBOE's fees for linkage orders will operate under a pilot program to 
allow the Commission and CBOE to gauge the suitability of the current 
linkage fees. The pilot would last until January 31, 2004.
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    \4\ See Securities Exchange Act Release No. 47294 (January 31, 
2003), 68 FR 6527 (February 7, 2003) approving SR-CBOE-2002-61.
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    Because all linkage orders received by CBOE are for the account of 
a broker-dealer market maker on another exchange, CBOE proposes that 
the fees applicable to such orders to be the same as fees applicable to 
market makers on other exchanges that submit orders to CBOE outside of 
the linkage taking into account how those orders are handled at CBOE. 
More specifically, the ``regular'' transaction fee applicable to non-
member market makers would apply to linkage orders (currently $.19 per 
contract for equity options and QQQ options, and $.30 or $.15 per 
contract for OEF options depending on premium). Further, a $.05 per 
contract

[[Page 14446]]

trade match fee would also apply to each linkage order. Lastly, if a 
linkage order is executed in whole or in part on RAES,\5\ a $.30 per 
contract RAES fee would apply, and if any portion of a linkage order is 
manually handled, a $.04 per contract floor brokerage fee is assessed.
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    \5\ RAES is the automated execution system feature of the 
Exchange's order routing system that is owned and operated by the 
Exchange and that provides automated order execution and reporting 
services for options. See Exchange rule 6.8.
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2. Statutory Basis
    The Exchange believes that the proposed rule change meets the 
requirement of section 6(b)(5) under the Act \6\ in that it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transaction in 
securities, to remove impediments to and perfect the mechanism for a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest.
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    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change does not impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Exchange Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change; or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal is 
consistent with the Act. Persons making written submissions should file 
six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Copies of 
the submission, all subsequent amendments, all written statements with 
respect to the proposed rule change that are filed with the Commission, 
and all written communications relating to the proposed rule change 
between the Commission and any person, other than those that may be 
withheld from the public in accordance with the provisions of 5 U.S.C. 
552, will be available for inspection and copying in the Commission's 
Public Reference Room. Copies of such filing will also be available for 
inspection and copying at the principal office of CBOE. All submissions 
should refer to File No. SR-CBOE-2003-11 and should be submitted by 
April 15, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-6989 Filed 3-24-03; 8:45 am]
BILLING CODE 8010-01-P